Companies with exposure to online advertising are entering 2009 facing a lot of uncertainty.
Will the global economic slowdown result in drastic cuts to online ad spend as some have predicted? Or will online hold up well as others have predicted?
If the average CPMs being paid for remnant display ads in the United States are any indication, 2009 might be a problematic year for some online publishers.
According to Pubmatic, an online ad optimization service, the average CPM for remnant ads across the more than 5,000 websites in its AdPrice Index fell to 26 cents in Q4 2008, down from 50 cents in Q4 2007 and down a penny from Q3 2008.
The AdPrice Index tracks CPMs obtained from the ad networks its constituents use to monetize ad inventory that isn't sold directly.
As the report demonstrates, the holiday season didn't boost remnant CPMs; it may have merely prevented a larger decline in them. As TechCrunch's Erick Schonfeld noted, "Normally, there is a huge jump between the third and fourth quarters because of the holiday season, so this is not a good sign."
This is true, but at the same time it's worth pointing out that publishers that find themselves highly-dependent on remnant ads probably have more to worry about than low CPMs.
As we've discussed on Econsultancy before, online publishers are creating too much ad inventory, and this of course has a direct effect on the amount of remnant inventory on the market. So while there's no doubt that the economy is having an impact on CPMs, the imbalance between supply and demand that has been growing can't be ignored either. While there may be little publishers can do about overall CPM trends, publishers can manage their inventory more effectively, helping to minimize the erosion of the value of premium inventory and (hopefully) creating less remnant inventory.
The full Pubmatic Q4 report, which contains breakdowns by website size and vertical, can be downloaded in PDF format here.